The labor market is tightening, the economy may be headed for a slowdown, and global trade is volatile. These macro trends may give business leaders pause. But there's not always a lot they can do about it. “What I want people to think about is what they can control," says Louis Mosca, executive vice president and COO of American Management Services, Inc., which works with small and mid-market businesses to optimize their operations.
“The things you can control, you should be a master of," adds Mosca. That means your sales process, your incentive structures and how you deal with your bankers, your customers and suppliers.
With that in mind, these tried and true money management tips will help keep your business positioned for success—no matter what the economy has in store.
What is really needed is real-time business management advice and proactive tax planning advice.
—Alan Padgett, president, Succentrix Business Advisors
1. Get a plan.
Whether you're just starting up or an established business, a business plan is essential. It's a roadmap that will keep you on the right track. Alan Padgett, president of Succentrix Business Advisors, recommends that all businesses have a three-year business plan that they update each year.
Just as important, says Mosca, is that it be communicated to employees so that they understand the bigger picture. And that incentives be aligned with the plan and overall goals. “Anyone with any authority needs to be tied to the plan," he says.
2. Look ahead.
It's been said that accounting is like driving a car while looking through the rearview mirror. Financial statements often deal with the past, and may not reveal a cash-flow problem until it's too late. “There's nothing really there to help the small-business owners immediately—it's always 30, 60, or 90 days behind," says Padgett.
In an age when you can get real-time stock quotes and news updates, your financial data should be up-to-the-moment as well. “What is really needed is real-time business management advice and proactive tax planning advice," he says. For example, his firm, which has over 30 franchised offices, uses cloud-based software to facilitate the real-time flow of information.
So how to keep on track? Mosca recommends putting together a cash-flow analysis that projects four weeks into the future, and updating it weekly, to identify problems while there is time to take steps to head them off.
3. Get a line of credit—but don't use it.
Lines of credit are lifelines, not a cash flow strategy. "The one thing everyone should be doing is establish the best lines of credit you can, not use them and pay off your debt as fast as you can," says Mosca. One big no-no he sees frequently is businesses co-mingling lines of credit with their operating or checking account. If you cannot pay off your debt, he says, “you're not making money."
Mosca suggests meeting with your lending institution once a month or quarter so you can show them what's going on. That helps to establish a good line of credit and getting it renewed. But remember, he says, lines of credit are for emergencies, not daily use.
4. Collect on your accounts receivable.
A good accounts receivable practice is critical to help ensure a smooth flow of cash coming in the door. Mosca and his team are often called in to deal with cash-flow crises. When clients find themselves in a cash flow crunch, his team tries to figure out quickly what they can do to become cash-flow neutral and rightsize. "That doesn't mean firing," says Mosca. "We believe in productivity." Instead, they'll look to sell off excess inventory, negotiate with vendors to stretch payment times, and collect on accounts receivable—even if it means giving a small discount to get cash in the door.
5. Prepare for the future.
Now that you have your basic processes under control, it's safe to poke your head up and pay attention to what's going on in the world. The country is preparing for a softening economy? You should, too, says Mosca. Trim costs and lock in long-term financing now before rates potentially rise further. With a little basic money management planning, you can stay firmly in the driver's seat.
Photo: Getty Images
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